23 February 2019
Weibo Corp.'s US offering values the company at US$5.5 billion. It makes its NASDAQ debut against a backdrop of weak valuations. Photo: Bloomberg
Weibo Corp.'s US offering values the company at US$5.5 billion. It makes its NASDAQ debut against a backdrop of weak valuations. Photo: Bloomberg

Is US still the best market for Chinese stocks?

A United States listing is a badge of honor for many companies, virtually guaranteeing overnight fame and sky-high valuations. But that idealized version of the US stock market is beginning to fray and investors are waking up to that reality.

King Digital Entertainment, the maker of the wildly popular Candy Crush online game, highlighted the pitfalls of the US market when it lost as much as 16 percent on its NASDAQ debut last week.

Focus Media Holding, China’s largest outdoor advertiser, is seeking to reenter the market not in the US but in Hong Kong. It was among a slew of Chinese companies privatized last year and taken out of the US due to poor valuation. Focus is reportedly seeking HK$10 billion (US$1.29 billion) in a proposed Hong Kong offering

Those privatized companies complained that they could not achieve their capital raising target, implying their market valuation was below expectations.

That’s the backdrop against which Sina’s microblog business, also known as Sina Weibo, the most popular microblog service in the mainland, will float its stock on NASDAQ on April 17, according to some media reports. It will trade under the stock code “WB”, CNBC says, citing regulatory filings.

In its prospectus submitted to the US Securities and Exchange Commission last month, Sina Weibo, renamed Weibo Corp., is seeking as much as US$500 million. The proposed deal values the company at US$5.5 billion. 

The filing showed the company posted a total income of US$188.3 million, with a net loss of US$38.1 million last year. The figures compare with US$65.9 million total income and US$102.5 million net loss in 2012. Also, it said Alibaba plans to raise its shareholding in the company to 30 percent and that Sina’s holding will decrease.

The Hong Kong Economic Journal’s EJ Tactics column examines the continuing allure of the US stock market to certain Chinese technology companies. 

This year, Alibaba and Jingdong Mall have set their sights on NASDAQ, seeking to raise US$15 billion and US$1.5 billion, respectively. Along with Weibo Corp.’s US$500 million offering, these fundraisings could help break the full-year record. Last year, eight mainland firms completed their share sales.

As of last week, there had been 141 initial public offerings (IPOs) in the US, up 64 percent year on year. Seventeen of the IPOs are technology plays, nearly tripling the number a year ago, according to Bloomberg.

Almost three-quarters of these new listings are making losses and about two-thirds have annual sales below US$50 million, the largest proportion of such companies since 2000.

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